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TCS U/s 206C

Muralidharan (Chartrered Accountants) (115 Points)

04 April 2020

I had posted a query regarding TCS u/s 206C whether this is applicable where the seller / buyer is deducting tax under CH XVII, is he coming under this provision in view of the clarifications given in Memorandum explaining the provisions of finance act

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11 Replies

Mandakulathur Ananthanarayanan (186 Points)
Replied 07 April 2020

As regards the new TCS provision introduced vide Finance Act 2020, the provision would not apply where TAx has been deducted at source on purchase of goods by the buyer from the seller. Therefore, only under this condition, TCS need not be collected and paid

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Muralidharan (Chartrered Accountants) (115 Points)
Replied 07 April 2020

Dear Mr M Ananthanarayanan For Purposes of better understanding and clarification no tax has been deducted at source on purchase of goods by the buyer from the seller since it is only a sale of commodity and TDS provision is not applicable on sale of commodity. The question is where the Buyer is already deducting tax under CH XVII on other transactions say, on payments made by it like salary, interest, Commission or contract etc., whether the provisions of 206C would apply by the Seller

Mandakulathur Ananthanarayanan (186 Points)
Replied 07 April 2020

No. (Assuming your query is on the newly introduced TCS provision) new provision Section 206C applies on the sale of goods only and not on any provision of services.

Also to reiterate your point regarding TDS on sale of goods.. This is possible when it's a works contract with material portion not separately mentioned in the invoice thereby requiring TDS u/s 194C to be made.

Muralidharan (Chartrered Accountants) (115 Points)
Replied 07 April 2020

Thanks for your immediate response. To elaborate and explicitly make it clear if the Buyer (A) normally deducts tax at source under CH XVII of the Act in respect of other transactions with others viz., say x, y and z and others under various provisions and has a TAN and is within the tax net and has not done any transactions with Seller (B), is there any obligation on the part of the Buyer (A) to collect TCS for the purchases made by him (A) from (B). The memorandum explaining the provisions of the Bill says it is to bring more persons within the tax bracket only.

Mandakulathur Ananthanarayanan (186 Points)
Replied 07 April 2020

Seller is supposed to collect TCS and not buyer.

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Muralidharan (Chartrered Accountants) (115 Points)
Replied 07 April 2020

Sorry the seller corrects

Muralidharan (Chartrered Accountants) (115 Points)
Replied 07 April 2020

Thanks and now kindly give your opinion after the correction

Muralidharan (Chartrered Accountants) (115 Points)
Replied 07 April 2020

......seller (B) to collect TCS for the purchases made by him (B) from (A)

Mandakulathur Ananthanarayanan (186 Points)
Replied 07 April 2020

Yes. Though no transactions have been entered into before between A and B, the transaction shall be subject to TCS provided
1. the transaction value of sale of goods during the year between A and B alone exceeds INR 50 lakhs and
2. turnover of seller during the year ( total turnover) exceeds INR 10 crores

Muralidharan (Chartrered Accountants) (115 Points)
Replied 07 April 2020

Thanks then what is the meaning of this

the provisions of this sub-section shall not apply, if the buyer is liable to deduct tax at source under any other provision of this Act on the goods purchased by him from the seller and has deducted such amount.

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Mandakulathur Ananthanarayanan (186 Points)
Replied 07 April 2020

Yes. That's what I explained in the case of works contract where material amount is not disclosed separately in invoice. In this case, buyer would be required to deduct tax on the entire tax amount including material value( which would otherwise not be subject to tax if separately shown in invoice). In this case, TDS shall apply and so, TCS shall not apply

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